Trasfer Price
Not what you're looking for?
Better home products Canadian operations are organized into two divisions: west and east. west division sells a component that could be used by east division in making one of the company's principal products. east division has obtained three price quotations from external suppliers for the component: $154, $138, and $143. examination of West division's accounting record pertaining to the production of the component reveals the following costs: direct materials, $56; direct labour $44; variable overhead, $18; fixed overhead, $25.
questions:
a) what savings (or profits) would be available to Better Home products if East Division bought the component internally rather than externally?
b) what would the transfer price be if the two division agreed to split the total company savings evenly between them?
c) assuming dual transfer pricing is used, set the maximum realistic price for West Division and the minimum realistic price for East division.
Purchase this Solution
Solution Summary
Response discusses the steps to compute the Trasfer Price
Solution Preview
Trasfer Price
Better home products Canadian operations are organized into two divisions: west and east. west division sells a component that could be used by east division in making one of the company's principal products. east division has obtained three price quotations from external suppliers for the component: $154, $138, and $143. examination of West division's accounting record pertaining to the production of the component reveals the following costs: direct materials, $56; direct labour $44; variable overhead, $18; fixed overhead, $25.
questions:
This situation involves the decision to set up the fair transfer price. As per ustransferpricing, "The "arm's-length principle" of transfer pricing states that the amount charged by one related party to another for a given product must be the same as if the ...
Purchase this Solution
Free BrainMass Quizzes
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Motivation
This tests some key elements of major motivation theories.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Operations Management
This quiz tests a student's knowledge about Operations Management